UNDP - - PowerPoint PPT Presentation

Comparative trends of income disparity in Bhutan, Nepal and the rest of the world: The missing links

by

• UNDP

Conference on

Interplay of Economics, Politics and Society for Inclusive Growth

Royal Thimphu College, Oct 15-16, 2012

A quick look at inequality and the policy debate

• Difference between polarization and inequality
• Therefore, an intuitive measure of polarization is:

Polarization= (between-group inequality) ÷ (within-group inequality)

Multidimensional polarization

Why is polarization important?

In a democracy, polarization makes consensus difficult. Polarization causes conflict. From a philosophical perspective, alienation and identification oppose a sense of inclusiveness

• Decomposition of Inequality into sub-groups

To measure polarization, we need to decompose overall inequality. Gini cannot be decomposed easily. Gini cannot be decomposed easily. The General Entropy class of inequality measures, such as the Theil index can be decomposed neatly.

World Theil Between Within Polar (ZK) Polar (Var) 1965 0.62 .32 .30 1.06 1.14 1980 .85 .28 .56 .50 .. 1990 1.04 .28 .76 .39 .20 2000 1.10 .33 .77 .42 .. 2010 1.02 .38 .64 .59 .21 India 1980 .41 .29 .12 2.41 1.26 1990 .44 .33 .11 3.00 1.20 2000 .53 .42 .10 4.20 1.60 2010 .55 .45 .10 4.50 1.50 Nepal 1995 .81 .14 .67 .21 .03 2005 .84 .17 .67 .25 .03 2011 2.19 .01 2.17 .0005 Bhutan(2 007) .27 .05 .22 .23 ..

Key messages and policy implications

• 1. Polarization deserves more space in policy debates. It reconciles two influential

policy stances by allowing us to view income through the rural-urban lens.

• 2. Polarization can be monitored in several ways.
• 3. Polarization should be reduced by trying to reduce between group inequality.
• 4. Less polarization is more important for inclusiveness than just less inequality.
• 4. Less polarization is more important for inclusiveness than just less inequality.
• 5. Polarization can be prevented by promoting growth enhancing policies which makes

more use of the capabilities of people who are outside the economic mainstream.

• 6. A strong youth policy can be very effective for young democracies.